EXTENT-2017: Software Testing & Trading Technology Trends Conference
29 June, 2017, 10 Paternoster Square, London
Governance, Risk Management and Algorithm Testing to Meet RTS6 Requirements for MiFID II
Jon Batty, Executive Director & Principal Consultant, GreySpark Partners
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Electronic trading within capital markets has surged over the past decade.
The complexity of the technologies and the offerings and operate models around those technologies continues to grow.
More venues
Faster routes to market.
Faster processing power to trade across multiple venues
More common access to Co-located services.
Complex trading algorithms – making-markets, increasing liquidity.
… and the provision and adoption of low-latency, high performance DSA, DMA, DEA services makes such trading capabilities AVAILABLE to many more firms than ever before.
Prompted by the so-called flash crash, and a number of high profile system failures and cases of market abuse…
…Not surprisingly, the automated nature, speed and increasing complexity of this whole ecosystem has become a specific area of interest to the regulators with regard to firms’ overall GOVERNANCE and RISK CONTROLS FRAMEWORKs.
Conversely, the same elements are in laser sharp focus of the firms’ operating boards, given the consequences of non-compliance in the context of the Senior Manager’s Regime.
So that’s the global backdrop and sentiment behind many regulatory changes. Let’s home in on this region in particular…
As stated in Recital 59 of the overarching MiFID 2 level 1 text…’the potential risks…..”
Article 17, of that same regulation turns its sights on “ the organisational requirements to be met …..”
Herein lies the indication of the scale of this particular regulation
– not just the end-to-end nature of the requirements – we’ll come on to those, and the REACH of the governance within an organisation in a moment
– but more importantly the TYPES of organisations that are caught by this regulation, and across many more asset classes than before. Many won’t have systems and controls of this scale in place to meet these demands.
These are the hedge funds, buy-side dealing desks, smaller brokers and others who control their own algorithmic processes who access the market via their own or DEA services.
So for the first time ever…
RTS6 and the legal elements of the delegated acts specify the systems, procedures, arrangements and controls
… the requirements for systemic risk avoidance and governance…
… into a single framework, against which firms will report, train and be accountable for annual reviews.
It defines:
Greyspark Partners believes that there are 10 things that trading firms must have in place for MiFID II RTS 6 compliance by January 2018.
We recently published an article discussing the need for a ‘Pit Crew’ to help firms who are now firmly embedded in this Formula 1 world of electronic trading.
Over the past 5 years, we have developed controls and best practises for electronic trading, and tools to help firms capture and evidence their controls in a manner that simplifies the presentation of this data to regulators and auditors.
For our implementation guide and more details about the regulations and our methodology, please come and speak to the Greyspark guys at Booth 10 in the auditorium.
Thank you.
Any questions?